The equity of Sky Properties has a beta of 1.25. The earnings of Sky are expected to
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Question:
The equity of Sky Properties has a beta of 1.25. The earnings of Sky are expected to grow at 5 per cent indefinitely. Sky maintains a constant payout ratio. The risk-free rate is 4 per cent and the expected return on the market is 8 per cent. Its last dividend was 20 cents per shares and a share is currently selling for $5.25.
Calculate the cost of equity by two separate methods, first using the CAPM, and secondly using the dividend growth model.
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
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